TPE resin prices, June 25-29: PE,PP up $0.01/lb; PE rises for the first time in three months

Polyethylene and polypropylene spot prices rose last week, with the former rising for the first time in months. "Nothing goes down forever," noted Michael Greenberg, CEO of spot-trading platform, The Plastics Exchange (TPE). PE experienced its first gain in 13 weeks, while PP recorded back-to-back penny wins. During the second quarter, commodity resin prices tumbled and eventually more than erased the previous increases implemented through December 2011. Where do we go from here? "The market seeks new direction and at this point and can really go either way," Greenberg said.

TPE resin prices, June 29, 2012

Energy prices moved higher last week, sparked by a massive Friday rally that was fueled by European economic optimism. August crude oil futures spent much of the week below $80/bbl, but ended on a positive note after soaring $7.27/bbl in one day to $84.96/bbl. August natural gas prices were also higher adding $0.156/mmbtu to settle at $2.824/mmBtu. The crude oil : natural gas price ratio was roughly steady at just above 30:1.

Ethylene spot prices continued to recover, but then faded as the week wore on and ultimately ended lower. Ethylene for June delivery reached a high of $0.465/lb before trading down in a series of transactions. The most recent was at $0.42/lb for both June and July delivery, for a net loss of around $0.02/lb. A couple crackers returned to service after their planned maintenance, while a few others remain off-line partially due to unplanned outages. Forward ethylene prices for the balance of 2012 slope gently lower towards $0.40/lb. Ethane recouped early losses to settle at $0.295/gal ($0.125/lb).

Polyethylene (PE) spot prices added a penny, rising for the first time in about three months. The small gain resulted from the spot market cleaning up after a month/quarter end purge and does not necessarily signal a trend reversal, Greenberg noted. Some of the low-end offers, particularly for large volume export material, seemed to have cleared, and some producers are looking to raise the export price by $0.01-$0.02/lb. Domestic buyers saw a wide-range of spot prices as suppliers sought maximum value for their material when buyers were looking, while still meeting competitive offers as needed. As the month drew to a close, most producers appeared to acquiesce by agreeing to a $0.07/lb decrease in June PE contracts, bringing the 2-month total to $0.14/lb. July PE contracts have been suggested to roll steady, and Greenberg said word is swirling about forthcoming increases to be nominated for August.

Propylene's spot market was mostly flat in relatively light trading. Polymer grade propylene (PGP) for both July and August delivery changed hands at the steady price of $0.52/lb, which was also the price for June PGP contracts. The initial nomination to increase July PGP contracts by $0.03/lb was followed up by another nomination offering to keep prices steady at $0.52/lb. Refinery grade propylene (RGP) prices remained at $0.37/lb.

Polypropylene (PP) prices were up another penny this week, that's two in a row - almost a streak. Although June PP contracts dropped $0.155/lb, spot PP prices were only down $0.02/lb during the month as the spot market had already fallen sharply in April/May, well before contracts. "By the time June's decrease rolled around, contracts were just playing catch up," Greenberg explained. "With spot and contract prices better-aligned, processors shifted their purchases back to producer direct, reducing spot availability." Some traders expecting spot liquidity to remain seem to have been caught short, Greenberg noted, and were unable to source all the Generic Prime they sought. These traders have also bid up the good offgrade prices. July PP contracts will follow PGP monomer, which was nominated up $0.03/lb and subsequently steady too. A couple producers issued notice of their intention to gain an extra penny margin over the change in PGP.

Final thought from Michael Greenberg

For the first time since the end of March, both PE and PP prices recorded a weekly gain. It was just a small bounce to end the second quarter, which saw PE contracts slide by $0.14/lb and PP by $0.255/lb. While availability has tightened a bit, it still remains somewhat over-supplied, but that could be offset by additional processor resin re-stocking. The market has already made the bulk of its move and July could very well be a steady month. Forward markets through the end of 2012 are fairly flat, not providing much direction. There appears to be no urgency at the moment, let's wait and see what develops.